The swoop, one of the largest against the secularist armed forces, added to a growing sense of foreboding in the Muslim nation, where a clash between the government and the judiciary had already raised fears of a political crisis.
Armed forces chief General Ilker Basbug postponed a trip to Egypt as a result of the detentions, state-run Anatolian news agency said.
Among those held, according to broadcasters, were former Air Force Commander Ibrahim Firtina, former Naval Commander Ozden Ornek and ex-Deputy Chief of the General Staff General Ergin Saygun.
Speaking in Madrid at the start of an official visit, Prime Minister Tayyip Erdogan said more than 40 people were detained in the raids.
News channel CNN-Turk put the number at 49, including 17 retired generals, four serving admirals, 27 officers and one enlisted man.
The detentions would have been unthinkable in the past for a military that has ousted four governments since 1960.
But its powers have waned in recent years as a result of democratic reforms aimed at securing EU membership and most analysts doubt that the armed forces would mount a coup.
The suspects held in Ankara were flown to Istanbul for questioning over the 'Sledgehammer' plot after police raids in the cities of Istanbul, Ankara and Izmir.
According to media reports the plot, denied by the military, dated from 2003 and involved provoking a crisis with old foe Greece and planting bombs in mosques and museums in Istanbul to stir chaos and justify a military takeover.
"I don't know what the result of this is, but after the security forces have finished this process the judiciary will make its assessment," Erdogan told a news conference.
Turkish markets were rattled by the prospects. The lira weakened to 1.5265 lira in Tuesday-dated trade from an intrabank close of 1.5180 on Monday, the level at which it ended last week, and the main share index ended 1.36% lower, having begun the day nearly 1% higher.
"The government is now embroiled in an open and bitter power struggle with the judiciary and the military, raising the risk of a head-on confrontation that would badly damage political stability," Wolfango Piccoli from the Eurasia political risk consultancy said.
Erdogan also said he would call a referendum on constitutional reform to overhaul the judicial system, if he fails to get parliament's backing for change to curb the power of judges and prosecutors.
The AK Party, which first swept to power in 2002 ending the secularists' decades-old grip, has enough votes in the 550-seat parliament to pass a bill calling for a referendum.
"The judicial system should be objective and independent at the same time," Erdogan said.
He did not give any timeframe for a possible referendum.
Turkey is due to hold its next general elections in 2011 and Erdogan has repeatedly denied he plans to call an early vote.
The clash with the judiciary followed the arrest of a prosecutor who had investigated Islamic groups.
That prosecutor has been accused of links to an alleged far-right militant network, 'Ergenekon'. More than 200 people, including military officers, lawyers and politicians, have been arrested in the case since it came to light 2.5 years ago.
Critics of the government say the Ergenekon investigation has also been used to hound political opponents.
(EurActiv with Reuters.)